Uncertainty in the demand for Australian tourism ABSTR This paper conducts a visual examination of the data for both international tourist arrivals and for domestic tourism demand. The outcome of the examination suggests that the number of international tourist arrivals to Australia exhibits very volatile patterns, which is a similar outcome to a paper by Chan et al. (25). As for domestic tourism demand, Witt et al. (1992) suggest that the data is less volatile and relatively more predictable than the data for international tourist arrival. However, interestingly, this paper discovers that the changing number of domestic tourists travelling within Australia shows considerable fluctuation and is somewhat unpredictable. This paper concludes that the demand for Australian tourism may be volatile (or uncertain) over time and is likely to remain so. In fact, such volatility makes it difficult for tourism policy-makers to predict the future demand for the industry. Therefore, investigating the nature of uncertainty in the demand for Australian tourism is imperative, especially, with a view to explaining why and how the demand remains volatile over time. Keywords: Uncertainty, time-varying volatility, tourism demand, Australia IRODUCTION In recent years, tourism in Australia has become increasingly important to the Australian economy. Tourism gross value added 1 has climbed gradually from $21.9 billion in 1997 to $26.5 billion in 2, which represents an increase of 21%. Export revenue generated by travel services was ranked third, with a value of $19.1 billion (Table 1). Moreover, the income generated from the tourism industries for individual states like Tasmania, Queensland, South Australia and Victoria have increased by 7%, 63%, 3% and 5%, respectively, in 2 compared to 199 (based on Australian National Accounts: State Accounts 2-5). In terms of employment in the tourism sector, there were 55, people employed in 25 compared to 5, people in 199 (based on Australian National Accounts: Tourism Satellite Account 2-5), which is an increase of %. Table 1 Top five exports based on export revenue for the year 2-25 Ranking Item Export revenue ($billion) 1. Rural goods 25.7 2. Metal ores and minerals 19.9 3. Travel services 19.1. Coal, coke and briquettes 17.2 5. Other manufactured goods 1. Source: Based on International Trade in Goods and Services, Australia (ABS Cat. No. 536.) 1 Tourism gross value added is measured as the value of the output of tourism products by industries less the value of the inputs used in producing these tourism products (Australian Bureau Statistics, 2-25). It indicates how much extra tourism goods and services have been produced by Australian tourism producers.
Despite the importance of tourism to the Australian economy, this paper discovers that the number of tourists travelling to and within Australia fluctuates widely over time, which indicates an uncertainty in demand for Australian tourism. For international tourist arrivals, the number of international tourists from different countries of origin varies over time (Figure 1). In fact, some of the data show strong variation such as tourist arrivals from Hong Kong, Japan, Malaysia, Singapore and the U. For tourist arrivals from China and Korea, the data show structural breaks, namely a drastic decline in the number of Chinese tourists in 23 due to the outbreak of the RS virus and a sharp decrease in the number of Korean tourists in 199 that could be attributed to the Asian Financial Crisis. In terms of tourist arrivals to individual Australian States, the number of international tourist arrivals to Australian Capital Territory (), South Australia (), Tasmania () and Northern Territory () seem to have strong variations, whereas the data for tourist arrivals to Victoria (), New South Wales () and Western Australia () exhibit seasonality (Figure 2). For domestic tourism demand, on the other hand, some of the data for domestic day-trippers, overnight intrastate visitors and overnight interstaters exhibit volatile patterns and seasonality. In fact, the data are generally somewhat unpredictable (Figures 3 to ). The fluctuation in the number of tourists in Australia might cause significant impacts on the Australian economy. The first and most direct impact could be the employment opportunities in the tourism industry. As the patterns of Australian tourism are uncertain and unpredictable, tourism business managers might attempt to restrict employment opportunities. As an extreme, they might further reduce the number of jobs in such a way that they can avoid the risk of bearing high labour costs while losing profitability. In other words, uncertainty in demand for Australian tourism might affect the sustainability of employment in the tourism sector. A second impact of this uncertainty could be in government revenue from tourism taxes. Tourism taxes may be defined as taxes which could be described as applicable specifically to tourists and the tourism sector or, alternatively, if not specific to the tourism sector, those which are applied differently in tourist destinations (Ihalanayake and Divisekera, 26, p. 29). To sustain tourism development in Australia, tax revenue from tourism is one of the most important sources of government revenue used to finance development expenditures. The National Tourism Alliance (A) reported that the Australian government utilises tourism tax revenue to provide funding for several tourism incentive programs such as the See Australia campaign and the regional tourism programs (A, 23). However, the fluctuation in the number of domestic and international tourists in Australia might cause variation in tourism tax revenue. Ihalanayake and Divisekera (26) provided evidence that the growth rate of tourism tax revenue in Australia seems volatile. For instance, the revenue grew by % during 2, which is a high rate of growth, and was possibly due to tax reform and the large number of international tourists during the Sydney Olympics. However, in the subsequent year, the revenue declined by 1.5% and this was attributed to the large fall in the number of tourists when terrorist attacks occurred in the U. In conclusion, a variation in tourism tax revenue, which could be caused by a fluctuation in the number of tourists, would affect public policy-makers in terms of strategic planning and financing tourism development in Australia.
Figure 1 Number of international tourist arrivals by source of country from 1991 to 25 1 2 25 1 3 2 15 2 6 1 1 5 2 92 9 96 9 2 92 9 96 9 2 92 9 96 9 2 92 9 96 9 2 CANADA CHI NA GERM ANY HONG KONG 9 25 Number of tourist s 7 6 5 3 3 2 1 2 15 1 5 1 6 2 2 92 9 96 9 2 92 9 96 9 2 92 9 96 9 2 92 9 96 9 2 J APAN KOREA M ALAYSI A NEW ZEALAND 5 6 1 5 3 6 2 3 1 2 2 92 9 96 9 2 92 9 96 9 2 1 92 9 96 9 2 SI NGAPORE UK U Year Source: Based on monthly Short-term Overseas Arrivals and Departures (1991-26)
Figure 2 Number of international tourist arrivals to individual Australian States from 1991 to 25 6 3 5 25 1 2 3 6 2 15 1 1 2 91 92 93 9 95 96 97 9 5 91 92 93 9 95 96 97 9 91 92 93 9 95 96 97 9 2 Number of tourists 1 1 6 6 2 91 92 93 9 95 96 97 9 2 91 92 93 9 95 96 97 9 91 92 93 9 95 96 97 9 6 1 5 6 3 2 2 91 92 93 9 95 96 97 9 1 91 92 93 9 95 96 97 9 Year Source: Based on monthly Short-term Overseas Arrivals and Departures (1991-26)
Figure 3 Number of domestic day-trippers by states 15 1 13 11 1 7 6 5 3 9 5 75 7 65 6 55 9 1999 2 21 22 23 2 25 2 1999 2 21 22 23 2 25 5 1999 2 21 22 23 2 25 36 1 Number of tourists (') 36 32 2 2 2 3 32 3 2 26 2 1 1 1999 2 21 22 23 2 25 22 1999 2 21 22 23 2 25 6 1999 2 21 22 23 2 25 13 11 1 36 9 32 7 2 6 1999 2 21 22 23 2 25 2 1999 2 21 22 23 2 25 Year Source: Based on Travel by Australians, quarterly series from March 1999 to December 25
Figure Number of domestic overnight intrastate visitors by state 1 1 6 2 52 36 2 1999 2 21 22 23 2 25 32 1999 2 21 22 23 2 25 1999 2 21 22 23 2 25 32 5 Number of intrastate visitors (') 31 3 29 2 27 26 11 1 9 7 5 35 3 25 25 1999 2 21 22 23 2 25 6 1999 2 21 22 23 2 25 2 1999 2 21 22 23 2 25 17 36 15 1 32 13 2 2 1999 2 21 22 23 2 25 11 1999 2 21 22 23 2 25 Year Source: Based on Travel by Australians, quarterly series from March 1999 to December 25
Figure 5 Number of domestic overnight interstaters from State of origin to 36 32 2 2 9 7 6 5 3 2 1 9 7 6 5 3 2 1 Number of interstaters (') 32 2 2 2 1 6 2 1 1 6 2 2 Source: Based on Travel by Australians, quarterly series from March 1999 to December 25
Figure 6 Number of domestic overnight interstaters from State of origin to 5 5 35 3 25 2 2 2 75 7 65 6 55 5 5 15 Number of interstaters (') 17 15 1 13 11 1 36 32 2 2 2 11 1 9 7 6 11 1 9 7 6 5 Source: Based on Travel by Australians, quarterly series from March 1999 to December 25
Figure 7 Number of domestic overnight interstaters from State of origin to 1 1 6 2 6 5 3 2 1 1 6 2 Number of interstaters (') 6 5 3 2 1 1 1 6 2 35 3 25 2 15 1 5 7 6 5 3 2 1 Source: Based on Travel by Australians, quarterly series from March 1999 to December 25
Figure Number of domestic overnight interstaters from State of origin to 7 1 35 6 5 3 2 95 9 5 75 7 3 25 2 15 1 1 65 5 Number of interstaters (') 1 9 7 6 5 3 35 3 25 2 15 1 5 55 5 5 35 3 25 2 7 6 5 3 2 Source: Based on Travel by Australians, quarterly series from March 1999 to December 25
Figure 9 Number of domestic overnight interstaters from State of origin to 2 2 2 2 35 3 25 2 15 1 5 Number of interstaters (') 9 7 6 5 3 2 2 32 2 2 2 6 5 3 2 1 Source: Based on Travel by Australians, quarterly series from March 1999 to December 25
Figure 1 Number of domestic overnight interstaters from State of origin to 1 6 2 1 1 6 2 Number of interstaters (') 7 6 5 3 2 1 2 2 1 1 1 6 2 Source: Based on Travel by Australians, quarterly series from March 1999 to December 25
Figure 11 Number of domestic overnight interstaters from State of origin to 9 2 7 6 5 3 75 7 65 6 55 5 2 2 5 Number of interstaters (') 2 2 2 2 27 26 25 2 23 22 21 2 19 1 9 7 6 5 3 1 9 7 6 5 Source: Based on Travel by Australians, quarterly series from March 1999 to December 25
Figure Number of domestic overnight interstaters from State of origin to 1 2 1 6 2 2 1 1 6 Number of interstaters (') 7 6 5 3 2 1 5 5 35 3 25 2 15 1 1 6 2 1 1 6 2 Source: Based on Travel by Australians, quarterly series from March 1999 to December 25
CONCLUSIONS AND IMPLICATIONS As discussed above, the uncertainty in the demand for Australian tourism has significant impacts on the Australian economy, especially the restriction of employment opportunities in the industry and variation in tourism tax revenue. Even though there is uncertainty in tourism demand, the Australian Government acknowledges the importance of tourism to the Australian economy and has initiated the allocation of resources for developing new tourism destinations in Australia, particularly in regional and rural areas of Australia (National Tourism Investment Strategy: Investing for Our Future, March 26). However, there is a main concern for the government or tourism policy-makers. That is, in terms of planning marketing strategy, the volatility in the historical data of tourist arrivals and domestic tourists might increase the difficulty for tourism policy-makers to accurately predict future demand for the industry. Therefore, this paper argues that it is imperative to investigate the nature of uncertainty in the demand for Australian tourism, i.e. how volatile is the demand over time, what are the possible factors that affect the time-varying volatility in the demand and can such volatility affect the accuracy in forecasting tourism demand? This investigation aims to seek explanations of why and how the demand volatile over time. By doing so, we might able to determine the models that can explain the patterns of above historical data and generate accurate prediction. The above investigation will be conducted by the author as parts of her PhD thesis. REFERENCES Australian Bureau of Statistics (2-25), Australian National Accounts: Tourism Satellite Account 2-5, Canberra: Australian Bureau Statistics. Australian Bureau of Statistics (26), International Trade in Goods and Services, Canberra: Australian Bureau Statistics. Australian Bureau of Statistics (26), Short-term Overseas Arrivals and Departure, Canberra: Australian Bureau Statistics. Chan, F., Lim, C., & McAleer, M., (25) Modelling multivariate international tourism demand and volatility Tourism Management, 26 (3), 59-71. Commonwealth of Australia (26), National Tourism Investment Strategy: Investing for Our Future, Canberra: Department of Industry, Tourism and Resource. Ihalanayake, R., & Divisekera, S., (26) The tourism tax burden: evidence from Australia Tourism Economics, (2), 27-262. International Visitor Survey (1999-25), International Visitors in Australia, Canberra: Tourism Research Australia. National Tourism Alliance (23), Analysis of the taxes and assistance impacting the tourism industry, Canberra: National Tourism Alliance. National Visitor Survey (1999-25), Travel by Australians, Canberra: Tourism Research Australia. ACKNOWLEDGEMES The author is grateful to STCRC for their financial support to attend CAUTHE 27 conference in Sydney and Professor David Allen for his valuable guidance and suggestions.